On Chicago's South Side, vandalized, foreclosed homes sit in disarray—their copper piping stolen away, their walls and floors water-stained and their yards a mess. These vacant homes go unsold, as prices decline and credit availability tightens, and banks lose money. But local real estate investors—ready to pick up properties for cheap—can turn a profit.

The market in Chicago, where one in 40 housing units were targeted for foreclosure last year, offers shrewd investors an opportunity to buy buildings to fix up and sell, or to rent and hold until the economy improves. For those with cash on hand or a line of credit from a bank, it’s certainly a buyer’s market: area home prices have fallen about 8 percent in the past year, and the rate for 30-year fixed mortgages is a record low 5 percent statewide, according to real estate site Zillow.

Ken Kalan, a full-time real estate investor from Oak Brook, closed last week on a three-bedroom home in Roseland, his third property purchase on the South Side. He paid only $12,000 and plans to spend about $40,000 to replace parts of the house that were vandalized or stolen—kitchen cabinets, electric wiring, pipes, bath fixtures, a furnace and a hot-water heater. He thinks the repairs, which will take several months, will raise its value to about $80,000.

“The plan is to rehab it and rent it,” Kalan said. “It’s unfortunate that a lot of these homes start out as nice homes, but they’re not secured quickly enough,” allowing vandals to pillage.

Investors like Kalan find foreclosure deals by networking with others in the industry and searching Web sites that list foreclosed, bank-owned and “short-sale” properties, available for less than is owed on their mortgage loans.

Ryan Steele, the director of one local networking group for real estate investors called WCRT Inc., looks outside the city for fixer-uppers in nice neighborhoods. He’s bought about ten homes in northwest Indiana in the last several months, including a three-bedroom brick house in Gary for $19,000.

After spending another $24,000 to replace stolen plumbing, refinish wood floors that were hidden beneath ugly green shag carpets, and repair a hole in the roof, he says the house is worth $85,000. He’s renting it out for $800 a month.

“Banks are discounting prices because there’s not as much demand,” Steele said.

Investors, rather than typical buyers, go for the foreclosed properties because they tend to be in bad shape—not ready for someone to move in.

“They know that there are issues with the property. They usually are in a state of disarray,” said Drew Shreeves, a Chicago real estate agent and WCRT member. Each month, seven to 10 of Shreeves' clients buy foreclosed properties in the area.

Those new to real estate may hesitate to put money into a down housing market, but not members of WCRT or fellow investing group Chicago Creative Investment Association—a 25-year-old organization of residential real estate investors.

“Get busy actually helping people who are stuck with properties!” Jane Garvey, the association’s president, yelled across a standing-room only crowd at the group’s monthly meeting at the Signature Events at Seven Bridges conference center in Woodridge on Sunday. “These rates are unbelievable right now. If you can get into them, take advantage of them!”

She surveyed the group: How many are in the middle of real estate deals? How many had bought a foreclosed home, a bank-owned property? After each question, hands shot up.

“This is the best buying opportunity in years,” Garvey said. At the meeting, she bragged about a home in Des Plaines she bought for the same price it sold for back in 1986, $71,600. It’s a fixer-upper, though, with old, peeling paint and a dated '60s kitchen, but Garvey is in the middle of making improvements before renting it out.

Garvey founded the organization in the early 1980s, while she was a business professor at Loyola University in Chicago. Now, the animated, grey-haired Garvey spends her time investing, managing properties she owns and running the 1,200-person association that brings together investors from across Chicago and suburbs for monthly meetings and various workshops.

“It’s a model for a deal that could easily happen in Chicago or other places,” she said. “Sellers are just stuck in a market” and will lower prices to get homes sold.

With properties staying on the market longer, sellers—either individual owners or banks that have bought them back—are growing more desperate. Buyers with good credit, or those lucky enough to find wealthy partners to help fund their efforts, can get good deals on financing, Garvey said.

Some in the housing market regard investors like those in Garvey’s group as “vultures” who “swoop in” and buy up foreclosed homes, but investors see themselves as helping struggling communities.

Jamae Christopher, a real estate investor from Frankfort, considers buying foreclosed homes a way to keep properties from sitting vacant and depreciating.

“People like us go in, and by purchasing them, we raise their value and that makes the neighborhood feel better,” said Christopher, who joined the Chicago Creative Investors Association in 1992. “It’s sad that people are losing their homes, but we’re trying to turn a bad situation into a good one.”

Most recently, Christopher purchased a house in the south suburbs from a couple who were a few months behind on payments and facing foreclosure. She stepped in before that could happen, and now rents it out.

Some foreclosed properties don’t require extensive repairs and are sold to everyday buyers willing to wait for fixes in exchange for a cheap price.

Donna Klein is a real estate agent specializing in foreclosed properties with Chase Foreclosures in Naperville. After securing a government-backed loan from the Federal Housing Administration, her clients—first-time home buyers—purchased a foreclosed property in Addison for $20,000.

They’ll spend about $140,000 to fix the house, which had been “taken down to the studs,” Klein said, but afterwards, “the property will be valued at $205,000.”

Real estate agents like Klein and individual investors share information on available properties with each other at the Chicago Creative Investors Assocation’s monthly meetings. Additionally, others looking for real estate profits, such as other local investing groups and foreclosure-listing Web sites, set up tables at each meeting advertising their services. These companies have also seen a boost in business.

MortgageMitigators.com LLC helps sellers negotiate short sales, and with increased demand over the past three years, the site has gone national, offering its services beyond Chicago.

HotDamnHouses.com posts foreclosures, pre-foreclosures and bank-owned properties on its site and holds workshops at its Logan Square headquarters to direct investors to profitable properties. The three-year-old venture, part of Chicago-based AMR Group LLC, has seen business double over the past year, said Steve Baker, its sales director.

The company recruits investors from several local groups. “This is the best one,” Baker said of the Chicago Creative Investors Association. “People are more educated here.”

Visitors to the Illinois Foreclosure Listing Service, or ilfls.com, another local site, have increased by 50 percent since last January, as more and more real estate agents are drawn to the site.

“A lot more Realtors are interested as the so-called ‘regular’ housing market slows,” said TJ McKinney, the site’s founder. “We are also putting up more current news information.”

The site posts 5,000 new foreclosures each month and has expanded its short-sales listings to meet demand from visitors, who pay about $90 a month to access the site. McKinney also offers free seminars in Chicago suburbs on navigating the market.